Why China is heading for a crisis - Wang Jianmao

Wang Jianmao

Bulls and bears are out in full force on China. CEIBS Professor Wang Jianmao warns in NHPR for the danger of complacency after three decades of growth, where the word crisis has been eliminated from the dictionary.

NHPR:

Wang Jianmao of the China Europe International Business School says some companies keep producing and producing as though China's boom will never end. "Because of the huge success of the past three decades, I have to say, made some Chinese people very arrogant," says Wang. "They take this fast growth just for granted. They don't believe China will have a crisis. The problem is: If you don't believe you will have a crisis, you will have a crisis."

More in NHPR.

Professor Wang Jianmao is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

On Thursday November 1 the China Weekly Hangout will focus on eight years of harmonious society under Hu Jintao and what we can expect the next eight years under Xi Jinping. Including Janet Carmosky who will report on the findings during the National Committee on US-China Relations China Town Hall on Monday. The CWH is held on 10pm Beijing time, 3pm CET (Europe) and 10pm EST (US). More on the logistics of the hangout later this week at the China Herald or our event page at Google+.

Related articles

• Comparing two big elections - Janet Carmosky (chinaherald.net)
• What did Barbie wrong in China? - Helen Wang (chinaherald.net)
• Shanghai uses changed policies for foreign investments - Mark Schaub (chinaherald.net)
• Are we ready for Chinese tourists? - Roy Graff (chinaspeakersbureau.info)

One-child policy undermines pensions - Wang Jianmao

Wang Jianmao (Photo credit: Fantake)

The one-child policy has been one successful tool to eradicate poverty in China, today the growing number of old people is severely undermining the ability to pay decent pensions, warns professor Wang Jianmao of CEIBS in the People's Daily. Companies might have to pay the bill. The People's Daily:

Wang Jianmao, a professor of economics from China Europe International Business School, ... expressed concern that the shortfall would become more serious as the country's elderly population increases and private firms look for ways to evade paying into the social security system on behalf of their staff. 

The country's one-child policy has slowly been eroding the labor pool since the early 2000's and has obviously reduced the number of workers contributing financially to China's retirees, Wang said. 

Also, as companies in China shoulder a growing proportion of the nation's social security burden, private firms can be expected to circumvent pension regulations as slowing economic growth reduces their revenues, Wang said.

More in the People's Daily.

Wang Jianmao is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Related articles

• Who will employ six million new graduates? - Wang Jianmao (chinaherald.net)
• Weibo: Twitter on crack - Tricia Wang (chinaherald.net)
• Pressure to Repeal China's One-Child Law Is Growing (nytimes.com)

Who will employ six million new graduates? - Wang Jianmao

Wang Jianmao

This month China will have six million university graduates more. The world looks at the figure in awe, but the graduates themselves have problem: will they find a job? Professor Wang Jianmao of CEIBS thinks they might, if economic restructuring works out, he tells in The National. 

The National:

But under a "soft landing", will China still be the job-generating machine it has been in the past for new graduates? 

"If the 7 or 8 per cent growth is mainly driven by investment, the answer is no. If the 7 or 8 per cent growth is driven by consumption, the answer is yes, it's enough to generate the jobs," said Wang Jianmao, a professor at the China Europe International Business School in Shanghai. 

The "real change" to a consumption-driven economy, as opposed to one that relies on exports, will take place "in a few years", he adds. 

In the current economic climate, many graduates will probably have to settle for jobs that would not traditionally be considered as suitable for those with a university degree.

More in The National.

Wang Jianmao is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.  

Inflation still a problem - Wang Jianmao

Wang Jianmao

The debate between economists on how China should deal with its economy is running high. CEIBS professor Wang Jianmao warns in the US edition of the China Daily curtailing inflation should be high on the agenda, not loosening the financial strings on banks.

The China Daily:

Many economists now expect further loosening of the bank's reserve requirement ratio (RRR) in the first half of the year - allowing more credit back into the banking system - and then for interest rates to start being cut in the second half of the year. 

Wang Jianmao, professor of economics at the China Europe International Business School (CEIBS) in Shanghai, worries the government has not quite put the inflation genie back in the bottle and cautions about loosening monetary policy. 

He believes if the government pursues a policy of relaxing the RRR, it should actually also raise interest rates as a precaution. 

"I think any lowering of the Triple R and an increase in interest rates would be a very bad combination. I think the government needs to increase interest rates at the same time so we don't have a problem with inflation," he says.

More in the US edition of the China Daily

Professor Wang Jianmao is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Related articles

• Relaxing money lending is the wrong policy - Shaun Rein (chinaherald.net)
• Telecommunication changes for 2012 - Tricia Wang (chinaspeakersbureau.info)
• China's inflation rate eases (business.financialpost.com)

Wage inequality root of unrest - Wang Jianmao

Wang Jianmao

Increased social unrest is triggered off by the huge wage inequality in the country, tells CEIBS professor Wang Jianmao in the Australian news paper The National.

While official figures are hard to come by, "the people realise the situation is very bad", says Wang Jianmao, a professor of economics at the China Europe International Business School in Shanghai. Prof Wang partly blames China's model of development for the extent of inequality.

"The emphasis so much is, for example, on manufacturing and investment [but] services are underdeveloped," he says. "We ensure that capital can always get very high returns. We fail to generate enough jobs. That has suppressed the labour income."

While in the cities there is an income gap between many of China's 230 million migrant workers and the better-off locally registered residents, a key factor in inequality is the urban-rural divide.

More in The National.

Professor Wang Jianmao is a speaker at the Chinese Speakers Bureau. Do you need him at your meeting or conference? Do get in touch.

Related articles

• 'The Chinese Dream' to be published in China - Helen Wang (chinaherald.net)
• Is the Chinese dream also the American dream? - Helen Wang (chinaherald.net)
• Hardship in China, and how to survive - Helen Wang (chinaherald.net)
• Taiwan can catch China's luxury market - Shaun Rein (chinaherald.net)
• Labor shortage will cause stagnation - Zhang Juwei (chinaherald.net)
• The fading line between graduates and migrant workers - Zhang Juwei (chinaherald.net)

Economy needs a slow-down for repairs - Wang Jianmao

CEIBS in Shanghai via Wikipedia

China's economy needs a slow-down to repair its engines, says CEIBS economist Wang Jianmao in IPSnews, to get its three engines fixed, consumption, investments and export. "The government is too much focused on speed."

Just as a ship needs to slow down in order to repair its engines, our economy needs to slow down if it wants to tackle structural problems which endanger future growth." 

There are different economic engines, like exports, investments and consumption. "The vital engine of consumption, however, is not working in China. If we delay repair the other two will stop at the same time. Not a single country can sustain growth when its economy keeps growing with double- digits."

More than 50 Chinese companies have now entered the Fortune-500 list, but that is not necessarily good news, the economist says:

"That doesn't mean they are productive", says Wang. "They have had access to unlimited amounts of cheap money. The interest rate for them has been lower than inflation. They keep on investing up to the point of serious overcapacity, which has a negative effect on both the returns and the prices. In other words, they waste people's money." 

Big profits without adding value and creating jobs is a bad strategy for a country that urgently needs more consumer spending, says Wang. "Labour income as a share of gross domestic product has been declining for years. Instead of supporting capital-intensive industries, we need small and medium enterprises, in order to create labour-intensive jobs, up the value chain. We have the world's largest market for luxury cars, but at the same time too many people earn just the minimum wage."

More at IPS News.

by Fantake via Flickr

Wang Jianmao

Commercial
Wang Jianmao is a speaker at the China Speakers Bureau. When you need him at your meeting or conference, do get in touch.

Related articles

• The Chinese Dream - Helen Wang (chinaherald.net)
• Most-sought speakers for November 2010 (chinaherald.net)
• How I fought the financial crisis - Shaun Rein (chinaherald.net)
• More education not always better - Bill Fischer (chinaherald.net)
• Economic systems in US and China out of steam - Arthur Kroeber (chinaherald.net)

All is not yet well for China's economy - Wang Jianmao

Wang Jianmao Fantake via Flickr

Economic growth seems to be on track and China has passed Japan as the second largest economy in the world, still stiff measures from the government are needed to avoid a second dip, warns CEIBS economy professor Wang Jianmao in CIB-magazine.
Historical statistics on economic growth have been quietly adjusted again, suggesting  the economy was severely overheated just before the global financial crisis took off, showing a seriously overheated economy, writes Wang Jianmao.

The best scenario of proactive adjustment is a U-shaped process of maintaining a moderate growth rate of 7-8% during 2010-2012 and then returning to the potential growth rate of about 9% in 2013. The worst scenario of reactive adjustment is a W-shaped process of propping up double-digit growth until 2012 and then unavoidably diving for a second dip below 5% or even 4%. 

The decision-makers in China should remember the lessons of reactive adjustment and hard landings of the past. China's economy experienced full-blown overheating during 1984 and 1985, with actual growth rate significantly higher than the potential one. After attempts at cooling the economy, the growth rate dropped to 8.8% in 1986, down from 13.5% in 1985, which was similar to the recent shrink in the growth rate from 14.4% in 2007 to 10.2% in 2008 and to 9.1% in 2009. However, the adjustment efforts taken then were not seen through to the end, causing the growth rate to rebound to 11.6% in 1987 and 11.3% in 1988. Then, a second dip became unavoidable and China eventually plunged into a hard landing with a growth rate as low as 4.1% in 1989 and 3.8% in 1990. 

Since China plays a prominent role in the global economy, a second dip of the Chinese economy would mean a second dip for the world. Therefore, a "slow" U-shaped recovery of the Chinese economy should be interpreted as a positive sign indicating that China is moving along the right path. A quick V-shaped recovery is only possible for those countries not severely burdened by flawed development models. Unfortunately China does not belong to this group.

More in the CIB magazine

Commercial
Professor Wang Jianmao is a speaker at the China Speakers Bureau. Do you need him at your conference or meeting? Do get in touch.

Related articles by Zemanta

• Should Europe follow China? - Annette Nijs (chinaherald.net)
• Saving no longer tops China's agenda - Shaun Rein (chinaherald.net)
• Fat China, blame on the advertisement industry - Paul French (chinaherald.net)
• China Speakers Bureau to visit Sweden, Switzerland (chinaherald.net)